DISCUSSION
31 There was an issue between the parties about the proper construction of s 9-5(a) of the GST Act which prescribes the relevant condition for the making of a taxable supply ("you make the supply for consideration"). The AP Group contended that the Tribunal had overlooked the significance of the word "for" in s 9-5(a) and thus, instead of asking itself whether any supply was made for consideration, asked itself only whether a payment the payment was "in connection with" any supply. The Commissioner submitted that the word "for" has no work to do when s 9-5(a) is considered with the definitions of "supply" and "consideration" so that the Tribunal had asked and answered the correct question. The Commissioner also submitted that, in any event, the Tribunal had not overlooked the significance of the word "for" in s 9-5(a).
32 The Commissioner's approach to the issue of construction substitutes the definitions of "supply" and "consideration" for the statutory condition which is specified in s 9-5(a). Although the Commissioner said this approach was a result of the literal meaning of the definition, this is not so. Section 9-5(a) specifies as a condition of a taxable supply the requirement that "you make the supply for consideration". The definitions of "supply" and "consideration", even if read literally as part of that requirement, do not result in the omission of the word "for". If the definitions are inserted in substitution for the defined terms where they appear in s 9-5(a) the result is:
you make [any form of supply whatsoever] for [any consideration, within the meaning given by sections 9-15 and 9-17 in connection with the supply or acquisition].
33 Sections 9-15 and 9-17 identify circumstances which are included within the meaning of consideration including, relevantly in s 9-15(1)(a), "any payment, or any act or forbearance, in connection with a supply of anything". Even if these words are substituted for "consideration" the result is simply repetition of the "in connection with" element of the statutory condition, not omission of the word "for". The consideration must be "in connection with" the supply but the supply must also be "for" the consideration. "For", in this context, means "in order to obtain" (Macquarie Dictionary Online, item 3, Oxford Dictionary Online item 9(a)). The word "for" thus functions in the statutory description to identify the character of the connection which is required. It ensures that not every connection between the giving of consideration and the provision satisfy the first condition of making a taxable supply. If it were otherwise, any form of connection of any character between the making of a supply and the payment of consideration would suffice. The decisions on which the Commissioner relied to support this proposition, on analysis, do not do so.
34 It is true that the relevant question has been expressed in terms of connection in numerous decisions, including those to which the Commissioner referred (Reliance at [33], TT-Line at [15] and [18], Department of Transport at [67] and Amex at [67]). But in no case did the analysis begin and end with that question. In each case the nature and extent of the connection was also analysed to ascertain whether the supply was made for the consideration.
35 Contrary to the submission of the AP Group the Tribunal did not take a different approach in the present case. After posing the question in terms of the connection between the supply and consideration at [102], the Tribunal at [103] described types of connections which would be insufficient in the context of s 9-15, being a "tenuous" or "remote" connection. It is apparent that the context set by s 9-15 is that the supply must be made for the consideration (s 9-5), albeit that the consideration need not be given by the recipient of the supply (s 9-15(2)). This is confirmed at [104]. The Tribunal describes the connection between the fleet rebate payments as "direct and immediate" so that, in substance, the AP Group received two components of consideration for the supply of a car to a customer, the payment from the customer (the recipient of the supply) and a payment, the fleet rebate, from the manufacturer Toyota. Despite referring to the supply as the "trigger" for the payment of the fleet rebate, it is clear from [103] and [104] read together that the Tribunal is not suggesting that a mere temporal trigger would suffice. The connection the Tribunal describes at [104] is not a connection of that character. Accordingly, the AP Group's submission that the Tribunal was satisfied that s 9-5 was engaged merely because but for the sale to a retail customer the payments would not have been made, being the application of an insufficient test, cannot be accepted. The terms of [103] and [104] are inconsistent with the Tribunal having applied any form of "but for" test and no more.
36 The Tribunal's analysis of the question whether any of the payments involved a supply for consideration to the manufacturers also exposes the fact that the Tribunal recognised that the issue was whether there were supplies for consideration. The Tribunal said so in terms at [79] noting that if there was any supply to the manufacturers by the AP Group the next question was whether any of the "incentive payments" were "consideration for such a supply". At [84] the Tribunal also expressly rejected any approach based on mere connection of any nature, accepting the AP Group's submission that this would create chaos. Putting the issue beyond doubt, the Tribunal at [86] said that the incentive payments are not "made "for", or even "in connection with" any such supplies". The notion that the Tribunal explicitly recognised that "in connection with", in isolation, was insufficient because of the "for" requirement at [86], yet forgot about that requirement some 15 paragraphs later is unpersuasive. The AP Group's submission that the Tribunal approached the issues inconsistently is simply not borne out by the Tribunal's reasons.
37 It follows that to the extent that the AP Group's appeal relied on the notion that the Tribunal misconstrued s 9-5 by overlooking the requirement that the supply be for consideration there cannot be said to be any question of law which arises on the Tribunal's decision. This does not mean that the questions identified as questions of law do not arise, but it has the consequence that none of the questions involve the Tribunal's construction of s 9-5 of the GST Act. The Tribunal's construction of s 9-5 was orthodox and did not involve error. The problem with the questions of law said to arise in the notices of appeal and cross-appeal are that each embraces potential questions of fact and law. By not identifying questions of law which, if answered in a particular way are capable of vitiating the Tribunal's decision, the parties (no doubt inadvertently) have failed to identify the proper jurisdictional foundation of the appeal and cross-appeal. It is important for this to be noted because the inadvertence of the parties cannot be permitted to divert the Court's focus from the nature of the jurisdiction which it is exercising, which is founded on the existence and articulation of questions of law material to the decision which the Tribunal made. Once the argument that the Tribunal overlooked the significance of the word "for" in s 9-5 is dismissed (as it has been), it is apparent that the AP Group's case in the appeal is that the facts which the Tribunal found (and which are not in dispute) are incapable of satisfying the requirements of s 9-5 and/or that the Tribunal failed to consider relevant matters. If not understood in this way, it is difficult to see how the questions posed in the appeal might be questions of law. The Commissioner's case in the cross-appeal is that the Tribunal misunderstood and thus failed to deal with the Commissioner's case as put to it and, in so doing, failed to consider relevant matters. Although not framed as such in the notice of cross-appeal these were the questions the Commissioner identified in submissions and they are undoubtedly questions of law.
38 Leaving aside the submission about the Tribunal misconstruing s 9-5 which has been rejected above, the AP Group's case on the Toyota "fleet rebates" and Toyota "run-out model support" payments is that the facts found necessarily led to the conclusion that there was no supply by the AP Group of any car to a customer for consideration in the form of the "fleet rebates" and "run-out model support" payments. While the "fleet rebates" and "run-out model support" payments became payable on the supply of certain cars to certain retail customers in accordance with the conditions of those arrangements between the AP Group and Toyota, those payments were to reduce the price (or consideration) the AP Group paid to Toyota for the wholesale supply of the car by Toyota to the AP Group. The payments were not "for" and thus not "in connection with" in the requisite sense the retail sale of the car by the AP Group to a customer. As the AP Group put it, those payments could not constitute consideration at the stage of the distribution chain subsequent to the wholesale sale by Toyota to the AP Group, being the retail sale by the AP Group to a customer.
39 The AP Group submitted that its case could be tested in this way. Assume a fleet customer negotiates the purchase of 100 cars from a dealer either directly with Toyota or with the dealer. The dealer has 95 cars available in its floor-stock which it has purchased from Toyota at the discounted fleet price. It has five cars in its floor-stock which it has purchased at a price which does not include the fleet discount. For the 95 cars no payment of a fleet rebate by Toyota to the dealer is triggered. For the five non-fleet cars which the dealer sells to the fleet customer, the fleet rebate is triggered. As between the dealer and the fleet customer there is no difference in price. The price is always the discounted fleet price. There is no additional consideration which must come from Toyota. The terms of the deal between the dealer and the fleet customer are the terms of sale as between them and no more. As between the dealer and Toyota there is also no difference in price as between the 95 cars and the five cars. The fleet rebate is to ensure that there is no difference. There is no payment by Toyota to the dealer for the 95 cars and thus no possible taxable supply because the discounted fleet price has been taken into account in the price paid by the dealer to Toyota from the outset. There is only a payment by Toyota to the dealer for the five cars because Toyota needs to rebate the fleet discount to the dealer to ensure equivalence between the price of wholesale distribution of cars sold to fleet customers. The fleet rebate thus functions purely at the wholesale level. It is triggered by the dealer selling a non-fleet car to a fleet customer but the supply to the fleet customer is not "for" the consideration of the fleet rebate and thus is not relevantly in connection with that supply. Just as the Tribunal rightly rejected the notion that the dealer supplied Toyota with the service of selling cars to the dealer's customers so too it ought to have rejected the notion that there is a service of selling a non-fleet car to a fleet customer. The only transaction which involved a supply for the consideration of the fleet rebate was the initial wholesale of a non-fleet car by Toyota to the dealer.
40 The Commissioner submitted that the appropriate focus was the sale of the particular car. Where the dealer has purchased a non-fleet car from Toyota it is the sale of that car to a fleet customer which triggers the rebate. The trigger is not merely temporal; it is substantive. Because the fleet customer is always entitled to the relevant fleet discount (which varies depending on the fleet customer's status) the fleet rebate is a necessary part of the dealer's willingness to supply that car to that customer. The fact that the customer does not know of the payment from Toyota to the dealer is immaterial. So too is the fact that the fleet/non-fleet arrangements are internal to the wholesale arrangements between Toyota and the dealer. For that sale to occur, the consideration includes both the amount the customer pays and the fleet rebate from Toyota. The fleet rebate is thus "for" and in connection with the supply of the car to the customer.
41 This issue is not easy to resolve. The competing approaches reflect the different focus of the AP Group and the Commissioner. It is apparent that the submissions of the AP Group concern the overall relationship between the dealer and the manufacturer. At this level of generality the fleet rebates are part and parcel of what the AP Group described as the "wider rules of engagement" between the dealer and the manufacturer. The submissions of the Commissioner concern the specific transaction between the dealer and the fleet customer in respect of which the fleet rebate is payable. At this level of particularity the fleet rebate payment is for the supply of a non-fleet car to a fleet customer.
42 The submissions of the AP Group that all aspects of the arrangements between the dealer, the manufacturer and the customer had to be considered should be accepted: SAGA Holidays Ltd v Commissioner of Taxation (2005) 149 FCR 41; [2005] FCA 1892 at [78] To this extent if the Tribunal's statement at [98] that certain factors did not matter can be construed as a failure to consider those matters, we would agree that the Tribunal erred. It is apparent, however, that the Tribunal was in fact taking into account those matters but determining that in all of the circumstances of the case they did not carry weight. Nor can the way in which the Tribunal approached Ms Knowles' evidence at [94] be said to involve error. It must be correct that the dealer's characterisation of the payment cannot be determinative. Despite the apparent persuasiveness of the AP group's analysis of the wholesale and retail arrangements, if there is error of law in the Tribunal's reasoning it is very hard to pin down. That said, GST is either payable in accordance with the statute or it is not.
43 Ultimately, selection of the appropriate level of generality or particularity at which the assessment is to be carried out is fact-dependent. The critical facts include the nature of the supply said to be involved. This flows from s 9-5 which is concerned with each supply. On the facts of the present case, where there is no doubt that the sale by the dealer of a car to a customer (specifically, the sale of a non-fleet car to a fleet customer) causes or is the trigger for the making of a payment by Toyota to the dealer, it is necessary in terms of the statute to ask whether the dealer made that particular supply for consideration. The appropriate level for the assessment is the particular supply of the car in question by the dealer and the payment which that supply triggers. The price paid by the customer is clearly consideration for the supply. But so too is the fleet rebate paid by Toyota to the dealer. The factors on which the AP Group relied to avoid this result are not as persuasive as those which point to it.
44 First, and contrary to the AP Group's submission about the Tribunal treating the payments inconsistently, the supply in this case need not be characterised as the supply of a service by the dealer to Toyota, being the service of supplying a non-fleet car to a fleet customer. The supply is the supply of the car by the dealer to the customer. It is the consideration for that supply which involves two elements. Second, and consistently with s 9-15(2) of the GST Act it does not matter that the payment was by Toyota rather than by the recipient of the supply, in this case, the fleet customer. Third, the GST Act directs attention to the particular supply. For a fleet customer to purchase a non-fleet car two things have to happen. The customer must negotiate a price with the dealer (or Toyota) which will include the fleet discount. Toyota must pay to the dealer the fleet rebate. Fourth, the lack of knowledge of the fleet customer of the arrangements between Toyota and the dealer is one factor only but cannot be determinative on the facts overall. Fifth, the internal characterisation of the payment as a rebate for the wholesale transaction is also not determinative. Sixth (and in contrast to the "run-out model support" payments) the amount of the fleet rebate had to be given by the dealer by way of discount to the fleet customer. Finally, the critical difference between the 95 cars and the five cars in the example posed by the AP Group is that a payment by Toyota is required to be made for the five cars if, and only if, each is sold to a fleet customer. No equivalent payment is made for the 95 cars for the reason that the dealer has paid the discounted wholesale price for those cars. Further, no payment is made for any of the five cars which are sold to a non-fleet customer. What this last fact exposes is that it is the supply of the particular car (purchased for non-fleet purposes) to a particular customer (a fleet customer) which gives rise to the obligation for Toyota to pay the fleet rebate. The payment is for and in connection with that supply.
45 For these reasons we do not accept that the Tribunal erred in its conclusion that the Toyota "fleet rebates" involved the making of a taxable supply.
46 The same analysis applies to the Toyota "run-out model support" payments. Again, for each car sold in accordance with one of the periodic "run-out" programs Toyota conducted, Toyota would make a payment to the dealer. The appropriate level of assessment is thus the sale of the particular car which triggers the payment. As noted, there was no requirement that the dealer pass on any particular discount to the customer. In this sense, as the AP Group submitted, the "run-out model support" payments functioned to give the dealer greater room to negotiate to shift old stock. But this function in the overall arrangements between the dealer and Toyota does not alter the fact that, in respect of the particular supply, the dealer would receive consideration from two sources, both the customer and Toyota.
47 The absurd consequences which the AP Group said would flow from these conclusions are also not persuasive. Disclosure to customers of the "fleet rebate" and "run-out model support" payments is not an onerous requirement, if it truly be required. The concern that these are confidential between the dealer and Toyota is not founded on the evidence. The concern that disclosure might force a change in the way business is conducted is speculative whether that be because of an inability to claim input tax credits or possible ramifications for the luxury car tax or otherwise. An invoice showing the GST on the amount the customer paid excluding the rebate also does not seem to require "significant explanation" if the additional payments by Toyota are disclosed. It is not the case that every up-front discount on the wholesale price automatically involves providing consideration for a supply to a customer. An up-front discount is different in form and substance from a subsequent rebate because a car purchased for non-fleet purposes has to be sold to fleet customer.
48 This analysis also suggests why the Tribunal did not err in rejecting the Commissioner's contentions that the Toyota "fleet rebates" and "run-out model support" payments involved supplies by the dealer to Toyota for consideration and the Ford "retail target incentive" payments and the Subaru "wholesale target incentive" payments involved supplies by the dealer to each of Ford and Subaru respectively for consideration. The resolution of the issues again turns on the selection of the appropriate level of generality or particularity with which the acts said to constitute supplies are to be considered. In contrast to the "fleet rebates" and "run-out model support" payments none of these other payments are triggered by the sale of a particular car. The payments are part of wider programs in which dealers would have a strong incentive to participate but which do not depend on the sale of any particular car in any particular way. The conduct which the payments act to encourage is conduct relating to the overall management of the business enterprise comprised in the dealership, including sound ordering practices and clearance of old stock to make way for new stock, to the presumed mutual benefit of the dealer and the manufacturer. This indicates that the required focus is the overall relationship between the dealer and the manufacturer. Whether there are supplies for consideration is to be assessed in that context - which is precisely what the Tribunal did.
49 Although the Commissioner characterised the cross-appeal as one in which the Tribunal failed to deal with the case the Commissioner in fact put, and thus failed to consider relevant matters, the Tribunal's reasons as a whole disclose that it was aware of both the arrangements between the dealers and the manufacturers as a whole and the Commissioner's arguments. Although the Tribunal expressed its conclusions in terms of the "rulebook by which the game is to be played" at [85] it is apparent that the Tribunal well understood that the Commissioner was relying on the particular obligations which the dealers accepted in support of the contentions. So much is plain from the reference at [86], albeit in short form, to the various promises and obligations set by the manufacturers' rules and policies. The Tribunal's real point was that these arrangements reflect the overall relationship between the dealer and the manufacturer which always exists and that there is no supply of a service to the manufacturer by the dealer simply complying with those overall arrangements. The Tribunal thus selected the correct level of focus for its analysis, the level being dictated by the facts said to constitute supply for consideration.
50 Analysis of the particular obligations on which the Commissioner relied exposes that the Tribunal's reasoning and conclusions were sound. There is nothing equivalent to the circumstances in the Department of Transport case where there was a supply to the Department of the service of transporting an eligible disabled person in return for the payment of the rebate. Nor is the fact that the one consideration may be for more than the one supply (Commissioner of Taxation v Qantas Airways Pty Ltd [2012] HCA 41; (2012) 291 ALR 653 at [19]) a persuasive factor in this case given the difficulty of identifying any supply at all by the dealer to the manufacturer.
51 In respect of the Toyota "fleet rebate" plans the Commissioner noted that in order to obtain the payment the dealer had to comply with the Toyota Fleet Plan and, in particular, had to pass on the minimum discount applicable to every customer. As the Commissioner put it these arrangements involved a number of acts answering the statutory description of a supply by the dealer to Toyota "in particular the act of selling motor vehicles to a particular class of customer in particular ways and at particular prices stipulated by Toyota". In respect of the Toyota "run-out model support" payments the dealer was obliged not to offer arrangements to customers less advantageous than those specified by Toyota in the rules and conditions applying to the "run-out" program. The Commissioner described this as the dealer making the supply to Toyota of "the act of selling specified models of motor vehicles in particular ways and on particular terms stipulated by Toyota". In respect of the Ford "retail target incentive" payments the Commissioner said that the dealer supplied to Ford acts constituting "meetings specific sales targets, reporting sales in ways stipulated by Ford, promoting, marketing and advertising the sale of Ford's products in particular ways and ordering and estimating the requirements of vehicles in the form and on the dates specified by Ford". In respect of the Subaru "wholesale target incentive" payments the Commissioner submitted that the dealer supplied Subaru with services which included "ordering and paying for stock in particular ways stipulated by Subaru, planning vehicle ordering requirements, reducing holdings of aged stock, actively selling off the incoming stock list and assisting Subaru in supply chain management and the forward ordering of vehicles".
52 As the AP Group submitted the effect of the Commissioner's contentions is that there is one supplier (the dealer) and two recipients (the manufacturer and the retail customer) of two different supplies. This does suggest that close consideration must be given to the identification of any supply. Contrary to the Commissioner's submissions the Tribunal did not merely focus on the "essence or sole purpose" of the arrangements (at [82]) but evaluated the whole of the relationship between the dealer and the manufacturer in order to determine whether there was any supply "for" the consideration, being the various payments in issue. The Tribunal concluded that there was "an air of unreality" (at [81]) about the Commissioner's case in that the detailed arrangements between the dealer and the manufacturer reflected a commercial relationship which involved certain foundational aspects (the rule book for the relationship) in respect of which there are numerous acts of "give and take" none of which could practically be characterised as supplies in the relevant sense or supplies for consideration.
53 On analysis, the so-called supplies for consideration identified by the Commissioner are nothing more than the encouragement of an overall business relationship between the manufacturer and the dealer to the mutual benefit of both. The relationship involves a whole raft of obligations from one to the other all, presumably, with the ultimate objective of maximising their respective commercial positions. As the AP Group put it, the overall relationship contemplates a continuing dialogue between wholesaler and retailer in which promises are routinely exchanged, but to characterise this dialogue as involving supply after supply is unrealistic and impractical. To characterise the payment of the incentives intended to encourage the overall relationship to operate efficiently as involving supplies for consideration is equally unpersuasive. A dealer will always wish to sell as many cars as practicable and to move old stock to make way for new stock. So too a dealer will always wish its ordering arrangements to be the most efficient and economically beneficial to it. The manufacturer will have the same objectives. It is this context which underpins the Tribunal's conclusion that the payments are not for the supply of anything by the dealer (at [86]). As the Tribunal said at [86] the dealer (which must be inferred to act in an economically rational manner in the ordinary course) will always want to run the business in this way. The fact that the dealer receives a payment as an incentive when certain thresholds associated with running the business in this way does not mean that the dealer is supplying a service to the manufacturer for consideration. If the incentive payment were not available there is no basis to infer that the dealer would not behave in the same way for free. For these reasons there cannot be said to be any supply for consideration in these arrangements.
54 For these reasons, we do not consider that there is any question of law arising in the appeal which, if answered one way or another, would have the effect of vitiating the Tribunal's decision. We agree with the Tribunal's decisions about each payment If it is necessary to answer the specific questions posed (which, as noted, are not articulated as questions of law although we accept that they include such questions), the answers would be:
(1) Yes
(2) Yes
(3) No
(4) No.
55 It follows that the appeal and the cross-appeal should be dismissed, and it is unnecessary to say more about the notice of contention. The circumstances suggest each party should pay its own costs of the appeal and cross-appeal rather than orders being made that the AP Group pay the Commissioner's costs of the appeal and the Commissioner pay the AP Group's costs of the cross-appeal but if any party wishes to be heard on costs it may be done through written submissions within 14 days.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Edmonds and Jagot.